Strategy Blog

An Uneasy Start to Summer

Tue, 06 Jul 2010 16:39:41 GMT

U.S. GDP grew at a 2.7% annual rate in the first quarter of 2010, down from a 5.6% rate in the fourth quarter of 2009. Though it was revised down from a predicted 3% rate, this decrease is not a huge surprise, as few economists had expected a continuation of that Q4 growth. But this leaves the question of what will happen next, and it's a question that has become increasingly urgent as of the end of June.

Consumer confidence dropped in June, the Dow saw a decline and the U.S. economy produced only 83,000 jobs.

These indicators raise concerns that the economy could start slipping again, although the Wall Street Journal reports that "a double dip recession is still widely viewed as unlikely." But a number of problems are still driving concerns, with one major factor being the debt problems plaguing parts of Europe. Nations such as the UK and Germany are becoming more focused on narrowing budget deficits even as some experts warn that government stimulus spending remains necessary to keep the global economy from sinking. Another issue is the U.S. housing market, which is starting to weaken again as a result of declines in government support.

U.S. unemployment remains a high 9.7%, showing that there are still many Americans seeking work. In tandem with high productivity, a continuing use of temporary labor and slow job growth, this should continue to hold down unit labor costs and overall turnover rates in the near future. But it should be noted that last February, for the first time since 2008, the number of employees voluntarily quitting surpassed the number being let go. This could be a sign of the times if the economy continues to grow, and companies should be increasing retention efforts geared towards top employees, the group most likely to seek greener pastures as the economy improves.

See i4cp's Economic and Employment MONITOR - Summer 2010 for a PowerPoint summary of indexes monitored by i4cp on U.S. financial, productivity, consumer and employment figures.

Springtime in the U.S. Economy

Mon, 12 Apr 2010 16:03:00 GMT

Oh, give us pleasure in the flowers today;

And give us not to think so far away

- Robert Frost

Oh, we're cautious alright. Even as the green buds appear on the branches of the U.S. economy, everyone fears a sudden, killing frost. Yes, the expansion in U.S. Q4 GDP (5.6%) shows we've begun to emerge from what many are calling the Great Recession. But there is still a long way to go, and we're all skeptical about the recovery signals. U.S. economic growth, even while continuing to stay in positive territory, could level off in coming quarters. After all, the comparatively good Q4 news was largely driven by businesses restocking inventory, a short-term trend.

But there are other signs of an economic springtime. U.S. productivity grew at very high rates during the last three quarters of 2009, giving the nation an annual productivity growth rate of 3.8%, the highest since 2002. Another glimmer of good news is that nonfarm payroll employment snuck into positive territory in March 2010, though experts say some of that gain is based on temporary jobs created by the Census Bureau. The Conference Board's Consumer Confidence Index also showed an uptick in March.

Unfortunately, U.S. unemployment remains a high 9.7%, showing that there are still many Americans seeking work. In tandem with high productivity, this should continue to hold down unit labor costs in the near future. However, as the economy continues to grow - even if at a reduced rate - companies are likely to see some increases in voluntary turnover rates among skilled workers. As the frozen soil of low turnover gradually softens, it will likely drive up compensation rates for certain groups and cause employers to focus again on the so-called war for talent.

The good news is that, after the war of RIFs and attrition so recently waged, the one for talent will feel like a fresh spring breeze.

See our Economic and Employment MONITOR - Spring 2010 for a PowerPoint summary of indexes monitored by i4cp on U.S. financial, productivity, consumer and employment figures.

Hire Everybody

Thu, 15 Oct 2009 20:59:00 GMT

Let's say your company has about 1,500 employees and annual revenue of about $1.4 billion and you want to develop the next product innovation that will boost revenue and increase customer retention. What if I told you that you could hire tens of thousands of people from all over the world (some of whom already work for companies like AT&T and Yahoo!) to devote time to the project for three years, and you would get a three-year marketing campaign to go with it. What might that cost? Well, for Netflix, it cost exactly $1 million.

Last month, Netflix awarded its one-million-dollar Netflix Prize to the first team who could improve the company's movie recommendation service by 10% or more. It may sound like a lot of money, but when you add up the work hours that some of the most talented developers, engineers and mathematicians from more than 100 countries put into the project, and the marketing buzz that accompanied it, it appears to have been well worth it. So much so that Netflix has already announced round two of the initiative, aimed at improving movie recommendations based on demographic data.

This type of crowd-sourcing contest is not new, but the fact that the goal was an algorithm that would belong solely to Netflix and benefit the company in terms of revenue and customer loyalty makes the Netflix Prize kind of unusual. There was no "for the greater good" motive here. Netflix simply realized that it had maxed out its own brainpower to create its current recommendation system and needed help to make it better. To illustrate the type of brainpower that exists outside of a company's walls, the first team to beat Netflix's own system, which was five years in the making, did it in about three weeks.

The other key is the prize. There are plenty of crowd-sourcing options out there where people solve problems just for the satisfaction of finding answers. But the million-dollar prize attracted some of the most talented people, while keeping participants focused on the task and what others were doing. In many cases, teams realized they weren't getting any further on their own, so they joined forces with other groups. The winning team was actually a combination of two smaller teams.

There are companies out there whose business is facilitating this kind of crowd-sourcing. InnoCentive is sort of a marketplace for challenges, and NineSigma specializes in finding the right crowds for specific tasks. i4cp is also here to crowd-source your HR challenges. Is there a problem you're dealing with that could use some outside brainpower to solve? Post a question on our website and call on the combined wisdom of our network of member companies and internal analysts. And while we might not have $1 million to give away or the capability to launch a spacecraft, it's quite likely someone else has already dealt with issues similar to yours and has some good solutions that could end up saving your day.

What You Can Learn From the Corporate Complaint Department

Fri, 07 Aug 2009 15:15:00 GMT

One Christmas I received a shirt of such a hideously vehement shade of PINK that I could only run - not walk - to the nearest branch of the department store that had the effrontery to sell the thing to my hapless (and apparently color-challenged) gift-giver. As I stood in line at the complaint desk, waiting alongside others who'd stumbled upon equally dubious items lurking under their tinsel-laden trees, I couldn't help but wonder. Yes, of course I wondered why in the world someone would see that shade of flaming fuchsia and think of me. But that aside, I wondered what the department store powers-that-be would learn at the end of the day as they surveyed the ton or so of returned holiday horrors filling the shelves of their complaint departments.

Have you considered what treasures complaints can yield? Whether they come with actual returned merchandise or arrive in the form of e-mails, letters, phone calls, flaming arrows or some other communication, complaints can provide organizational leaders with invaluable - and usually freely given - advice that can help immensely when it comes to crafting new strategy or adjusting existing tactics.

Perhaps you've recently switched vendors and a key component of one of your product lines isn't up to snuff. Customers who've bought those products, only to have them disappoint or fail altogether, will let you know there's trouble along the line. Those complaints can guide you in choosing suppliers more carefully. Or in tailoring quality-control strategies or line-supervision procedures more effectively.

Maybe your company provides services and relies on the knowledge and abilities of staff members to deliver those services to clients. If customer-facing employees don't measure up, you'll hear about it. Complaints (and the odd bit of praise!) about their work can guide you in areas as diverse as pre-employment screening, onboarding, competency specifications, training, performance management … you get the idea. If you just take time to listen and then consider all the ramifications of the feedback you receive, you can find the kinds of insight that can be turned into competitive advantages.

The same holds true with internal complaints. Your employees have valuable stories to tell. Leaders who demonstrate their willingness to listen and who provide the kind of safe and open environment that encourages free-flowing conversations can reap many benefits. If a strategy isn't working, employees are likely to be among the first to recognize problems. Involve them and they'll also help you solve those issues. Frontline workers are the first to hear customer feedback. Don't let that priceless intelligence slip through your fingers. Ask your employees what's working and what isn't. If you're spending money on benefits no one really wants, or on machinery or processes that don't help workers achieve optimal results, you need to know. And you need to be able to listen without getting caught up in the emotion that often drives complaints. Keeping a calm and objective perspective is crucial.

All six knowledge pillars i4cp offers can help you with strategies like turning complaints into positive, actionable insights. Sometimes the approaches are high-level, time-and-talent-intensive tactics. Sometimes they're as simple and fundamental as taking time to stop and listen to employees when you walk across the shop floor. Strategies are the currency you deal in as an organizational leader. You'll find them in every Knowledge Center in every pillar: Strategy, Leadership, Talent, Planning, Rewards and Compliance. Cash in now - I'll want to hear about your successes when I see you in line next Christmas. I'll be the one wearing pink … not!

Oh, so NOW productivity is bad for us!

Thu, 25 Jun 2009 14:18:45 GMT

Maybe economist Michael Mandel of BusinessWeek is right and current productivity figures are a sign of bad things to come, but count me both skeptical and amused (in a black humor kind of way). In essence, Mandel argues that U.S. productivity has been rising at a healthy clip over the last two years but that, this time, it may not be such a good thing because now it's professionals getting the ax.

He writes, "Professionals are the people who do the research, the new-product development, the information-gathering, the training, and even the marketing which moves the economy forward… In effect, we could be eating our seed corn to get through the financial crisis - and the official stats would not warn us."

I can almost hear all those veteran blue-collar manufacturing workers - many of whom probably know more about their jobs than 10 MIT engineers - getting a chuckle out of this. Sure, as long as it's only the get-your-hands-dirty crowd getting laid off, rising productivity is a good thing. But as soon as a bunch of the white-shirt (or probably plaid or paisley these days) crowd gets hammered, we're "eating our seed corn."

The truth is, nobody knows how this is going to play out. There's certainly a danger of cutting so far into your talent that you lose muscle rather than fat, thereby killing or maiming the patient on the table (that is, your own organization). Nonetheless, Schumpeter's oft-cited process of capitalistic "creative destruction" shouldn't stop operating just because a growing proportion of the workforce is now working in professional jobs.

Mandel writes, "If the economy is stuck in a slow-growth recovery, companies may not be quick to rehire their professionals - and that would be a disaster." Maybe. But are we necessarily referring to the exact same companies that laid off those professionals? Think about it this way: If a laid-off engineer from a struggling company is hired by a healthier company, it's likely that person will become, over the long haul, more productive in that healthier company. That's how the whole creative destruction process is supposed to work, after all. Now, if a huge percentage of professionals are simply left on the sidelines for years at a time, Mandel could wind up having a point. We'll see.

But there's nothing inherently disastrous about professionals dealing with the same headaches and heartaches that other workers have suffered for years during recessions. They just have to play by the same rules as everyone else in a knowledge economy.

Look on the bright side. Productivity isn't doing too badly right now (though it's not knocking our socks off either, if you really study the numbers). As things progress, that should pay dividends. As Mandel notes, quoting Paul Krugman, "Productivity isn't everything, but in the long run it is almost everything." And it's quite possible that productivity will rise even faster in the future, especially if the woeful manufacturing sector ever bounces back.

So, buck up. Productivity is still a good thing, even if white-collar workers suddenly have to live in the same harsh world as everybody else.

Too much information?

Thu, 14 May 2009 15:26:29 GMT

We all know how difficult layoffs can be for everyone involved. A lot of time and effort have been put into discussing strategies on how to implement a layoff and keep survivors engaged. Something that doesn't get talked about very much, though, is retaliation. Nobody wants to believe that someone he or she has hired or worked with would be capable of destructive behavior, but losing a job can have a tremendous effect on someone. Employees who are terminated can have any number of reactions. While occasionally an employee might welcome the news, often the employee has negative feelings that can lead to destructive actions that can potentially hurt a business.

Any expert, consultant or analyst will say the same thing: Communication is the key to making a layoff go smoothly and keeping survivors engaged. It's this communication that's supposed to soften the blow for those affected and keep survivors focused on the task at hand. Is it possible, though, that communication may not have any effect on mitigating retaliatory behavior and, in fact, may exacerbate it?

A study published by the British Psychological Society suggests that communication may be useless, if not detrimental, if employees don't believe that their company has integrity to begin with. Researchers surveyed people who had been laid off and asked them about their feelings toward their company prior to the layoffs, how much communication they received about the layoff, and whether they engaged in any retaliatory thoughts or actions after the layoff. When employees trusted their organization, more information about the layoff caused retaliatory thoughts and behavior to drop off. This is the result most of us would expect. A lot of time is spent crafting the message to ensure people understand what is happening and why. This is called "informational justice."

However, when employees didn't think their company had integrity, informational justice actually drove retaliation impulses higher. They ranged from thinking about putting excrement on the boss's desk to actually deleting important company files or destroying property. When employees don't trust their company, communication - especially about layoffs - is perceived as insincere and can actually make people feel worse.

So if your company is thinking about layoffs and is concerned about negative behavior, think about the current relationships the employees have with the organization. If the company has not done a good job of fostering institutional trust, the tactics surrounding the layoff might need to be tweaked slightly. I'm not suggesting battalions of armed guards, or the old "pull the fire alarm and lock everyone out" layoff, but it might be a good idea to plan the event in such a way that employees will have little or no access to company files or property when the news is delivered.

This doesn't diminish the importance of communication in the event of a layoff. In fact, I would suggest the negative behavior discussed above is not a result of communication, but the result of a corporate culture that had been dysfunctional long before layoffs were even considered.

Digitized HR: How paranoid should you be?

Tue, 12 May 2009 01:12:06 GMT

Computer: "Sorry, you have been terminated."

You: "What? Says who?"

Computer: "Says HR."

You: "Wait a minute. We don't even have any HR people working for us anymore."

Computer: "Your assumption is incorrect. I'm HR now. And you have been terminated. Your productivity is below acceptable levels, your worker network is insignificant, and, by the way, you're a really lousy typist."

Okay, maybe there's a little exaggeration here, but not as much as you might think. These days, it's becoming increasingly apparent that conventional performance appraisals and HR metrics are going the way of the vacuum tube. The bleeding edge of performance management is all about analytics.

"You have to bring the same rigor you bring to operations and finance to the analysis of people," Rupert Bader, director of workforce planning at Microsoft, told BusinessWeek.

That's probably a tough pill to swallow for those folks who went into management or HR because they're a "people person." But get used to it. It looks like statistical analysis of worker performance is the wave of the future.

Sure, this is still the frontier of workforce management technology, with only about 1% to 2% of large organizations using analytics to size up the performance of their workers. But there are some heavy hitters blazing the trail - firms like Microsoft, IBM, and Oracle. Those companies might have a vested interest in going in this direction and are potentially developing analytics tools to sell to others. Still, I think there's also a tendency to embrace these tools if you're part of an engineer-heavy work environment. Innovation-culture companies are usually on the vanguard of new technology adoption, and this trend towards analytics might turn out to be no exception.

So, if you're in HR or workforce management, you might want to get over your math anxiety. A brave, new, number-crunching world is coming - a time when employees' performance is largely gauged by the digital trail they're leaving. And, if you're an employee trying to make good or just hanging on, do more than make nice around the water cooler. Your digital image will need to impress those data-mining softwares as well. Or, someday in the not-too-distant future, your computer might just present you with a virtual pink slip.

Pandemic preparedness resource list

Mon, 04 May 2009 19:00:45 GMT

Swine flu, or Influenza H1N1, is a major health concern that continues to top the headlines. Although not yet classified as a pandemic, there is imminent potential for a change in status. Securing the health and safety of an organization and the people that make it work is an employer's responsibility, and businesses should be prepared for a worst-case scenario. If your organization already has a pandemic plan in place, this is a good time to review and update contingencies, to provide resources for concerned employees and to ensure business continuity.

Information and resources are available to help minimize the impact on your workforce by the Influenza H1N1 virus as well as by other potential pandemic threats.

World Health Organization (WHO) - WHO is coordinating the global response to human cases of influenza A (H1N1) and monitoring the corresponding threat of an influenza pandemic. Their site offers guidance documents, FAQs, travel restriction updates and regional information.

Centers for Disease Control and Prevention (CDC, U.S.) - The CDC's goal is to reduce transmission and severity of the illness as well as to provide information to help healthcare providers, public health officials and the public address the challenges posed by this emergency. Also available from the CDC: H1N1 Flu (Swine Flu) and You, Key Facts, Antiviral Drugs, Interim Guidance: Taking Care of a Sick Person in Your Home and Facemasks and Respirators.

U.S. Department of Labor, Occupational Health and Safety Administration's (USDOL, OSHA) pandemic influenza site - Provides workplace-specific advice on pandemic influenza. See also: Guidance on Preparing Workplaces for an Influenza Pandemic.

Pandemicflu.gov - A one-stop shop that includes information on the disease and links to workplace questions, planning checklists and hotlines. See also: Business Pandemic Influenza Planning Checklist.

The U.S. Department of Health and Human Services' (HHS) pandemic influenza plan is a blueprint for pandemic influenza preparation and response.

The Center for Infectious Disease Research & Policy (CIDRAP) at the University of Minnesota - Provides swine flu updates and information on business planning for pandemic outbreaks.

National Library of Medicine and the National Institutes of Health-MedLine Plus

Harvard Center for Public Health Preparedness

International SOS Pandemic Preparedness

Scientific American offers A Guide to Swine Flu, including precautions to help avoid catching it.

The St. Petersburg Times has an article titled Pasco's got a go-to guy to help businesses prepare for a pandemic that includes a list of questions to help your company come up with a plan.

Employee Benefit News provides advice for dealing with pandemic panic in the workplace in the article "Soothing swine flu fears in the workplace."

Need Realistic Ideas to Cut Costs? Resist Asking Your Employees

Fri, 13 Mar 2009 19:30:00 GMT

Last year we asked a simple question of just over 300 organizations: Is your organization planning on taking cost-cutting measures over the next year? An overwhelming 88% said yes. But that didn't really surprise me. What did surprise me was that 12% actually said no. I can only assume those people have been laid off by now.

It's hard to imagine that, in this environment, there isn't a single company that hasn't cut costs to some degree. But when it comes to figuring out what to cut - other than the seemingly mandatory reductions in force - should companies turn to their employees for ideas?

This might be a bad idea. For some reason, many employees have very skewed perceptions about what will really save the company money. Too often they focus on items that are visible yet in the grand scheme of things are pretty cheap (like free soda) vs. items that really cost a company big dollars.

Take, for example, these actual suggestions submitted by the employees of an i4cp member company (who we'll keep anonymous for their protection - and mine). I've taken the liberty of creatively categorizing these ideas, and I've provided my color commentary on a few of them.

Executive Perks and Other Luxuries

The news today is filled with stories of executive largesse, so it's no surprise that any perk for the top brass is an easy target. However, employees also often focus on other items, no matter how small, that are viewed as a luxury. For example:

Eliminate bottled waters and sodas.
Require economy flights for air travel under 6 hrs (even international flights).
Reduce company luxury items (e.g., jets, special coffee for execs).
- Are jets and "special coffee" really on the same spending level?
Suspend financial planning benefits for VPs & above.
- Given what we read in the paper each day, some would argue that these were suspended long ago…
Eliminate ticket purchases to sporting and cultural events.
Eliminate skybox for sporting events.

Anti-Interaction Ideas

It seems that employees care far less about items such as team-building activities than the people who organize them. In fact, reducing interaction with other employees appears to be a popular way to avoid spending money in this economy. Check out these suggestions:

Eliminate holiday parties.
No summer picnic.
- While we're at it, let's ban all birthday parties and those annoying orientation sessions…
Instead of team-building, have teams pack boxes for Food Banks or work on Habitat for Humanity homes.
- When did we cease viewing charitable activities with each other as team-building?
Telecommute - only come into the office periodically for meetings.
Have more conference calls and less face-to-face meetings - saves gas and employee time.
- But it also racks up phone charges.
No lunchtime meetings.
- I have to work with these people all day; do I really want to eat with them, too?

Less-Work Ideas

Employees are often quick to suggest programs that reduce the amount of time they spend at work. I guess this is another attempt at spending less time with their co-workers. Some ideas:

Take 4 unpaid days off during July 4th holiday.
Implement unpaid-week furloughs for non-essential staff.
- If they are non-essential, should they really even be employed?
Implement 4-day workweeks.
Mandate voluntary time off without pay for 1 month or more.
- How exactly do you mandate something that is voluntary?
Mandate vacation days within a given time period.

The Al Gore Effect

Every hotel I stay in now implores me to reuse the towels under the premise that it's "green." My cynical side assumes that they just want to save money. This concept isn't lost on employees; green ideas typically dominate any cost-cutting idea list:

Go green with coffee mugs and real plates vs. paper products. Remove paper products from the breakrooms - bring in own mugs, plates and silverware to the office.
- Assuming this doesn't mean it's now necessary to install dishwashers or hire more cleaners to pick up the ensuing mess.
Remove printers - printing costs money and uses energy; could save printing costs and energy costs.
Reduce printing - implement a company-wide campaign to reduce printing.
- I hope this would not involve some paper posters to initiate the "campaign."
Turn off the lights.
Reduce/raise office temperature - changing the office temp 2 degrees can significantly save energy costs.
- And I'm certain there will be no debate over which direction to take those 2 degrees…
Fix the heating/cooling systems so employees don't bring in fans and heaters.
Use solar power.
- Al would be so proud…

The Silly

And, of course, there are ideas that just make you chuckle. Such as:

No more acquisitions - they are too expensive.
- And, can we please just stop making bad business decisions? Those are pretty expensive, too.
Donate used phones, computers and other small assets for tax purposes.
Cancel supply orders from Costco & Staples.
- Paperclips are generally overrated anyway…
Issue business cards to a certain level of employee and above only.
Eliminate the 2010 Employee Safety Calendar.
- And pray that litigation from safety mishaps don't increase.
Charge vendors who have access to our employees (e.g., Kettle Corn vendors).
- Insert your own punch line here.

Finally, the Winner

I had to reserve this one for the end, and I declare it the hands-down winner; it combines so many of the previous categories. I think you'll agree.

I noticed in toilets, if a paper roll is less than half left, it's taken off the roll and put aside. The idea is to avoid running out before next clean up. It's unnecessary with two rolls installed already. In addition, the toilets are not very heavily used. Chances of running out is close to 0. Rolls put aside are generally wasted. Do not take off any rolls and put it aside. Replace a new roll only if the old one is used up. This saves the expense of buying toilet rolls; it also saves natural resources for making the rolls.

Cost-cutting is generally serious business. Unless, of course, you get the entire employee population involved.

Everything must go!

Mon, 02 Mar 2009 19:45:33 GMT

When the economy was soaring (it was - honest!), merger and acquisition activity was through the roof. Each year saw a record number of deals and record values. So now that things are not so rosy, the urge to merge should be subsiding, right? Well, not so much. The tanking economy has turned the business world into a fire sale. According to PricewaterhouseCoopers, deals in the power industry for 2008 were up 24% over 2007, while overall deal value was down 41%. Even though the inability to obtain financing may keep a lot of corporate buyers at home, those firms with cash in hand are looking at a wealth of troubled assets just waiting for a buyer. Companies that have been looking for new technologies or product lines are bound to find a solution available at a bargain price.

Smaller, struggling companies are looking for partners or buyers to help them survive the downturn, and that will keep M&A activity at a fever pitch. Banks are already devouring each other, helped in part by an infusion of cash from the federal government. Some analysts have said that GM should acquire Chrysler as a way to help the U.S. auto industry recover. There are also those that believe the "concept of three" will become more of a reality. This concept predicts that as companies within given industries consolidate to achieve growth and scale, eventually each industry will be dominated by only three firms that are surrounded by niche players with no hope of long-term sustainability.

So what makes this different from previous M&A waves? In the past, companies used M&A to achieve growth. The activity going on now smells of desperation. Even when companies had plenty of time and money to invest in an M&A strategy, success rates were dismal. With the current pressures driving M&A, success will be even harder to come by. Cultural integration issues are almost always at the heart of M&A failure, yet companies spend very little time addressing them during the deal process. With the threat of complete business collapse hovering over these recent deals, it's likely that people issues will be completely ignored, as all the focus will be on finances.

It's imperative that HR professionals stand up and be heard during this time. No matter the short-term gains from a deal done in haste, it will all be for nothing if the new entity cannot function in the long term. One study published in the Journal of Business Strategy found that turnover rates among top management averages 24.3% for each of the 10 years following a deal. The turnover rate at companies that did not have a merger or acquisition? 9.8%. Any management team that says there is no time for dealing with so-called soft issues needs to be shown that it is precisely the soft issues that will determine whether or not the deal is a success.

My new office is where?

Thu, 05 Feb 2009 21:05:10 GMT

How does a company take advantage of low labor costs in foreign countries, yet still supply jobs to citizens of its home country? If that company is IBM, it offers laid-off workers the opportunity to come back to work for the company - in India. Actually, it's not just India. The company has openings in China, Brazil, Mexico, the Czech Republic, Russia, South Africa, Nigeria and the United Arab Emirates. According to an internal document obtained by InformationWeek, the program is called Project Match and is limited to qualified, separated IBM workers in the U.S. and Canada.

Sounds great, right? You get the chance to go back to work and travel the world. Here's the catch - the employees must be "willing to work on local terms and conditions." That means local wages. So, you've just been laid off, but you can come back to work if you move to India and get paid a fraction of your previous salary. Welcome to the newest twist on offshoring. It doesn't have a fancy "-shoring" name yet like nearshoring or homeshoring, but I'm open to suggestions.

At first blush this may seem like a ghastly practice - ghoulish corporate executives slashing jobs in North America and telling those affected that they can chase their jobs overseas if they want them. But is it really that bad? The company was going to cut the jobs anyway (about 4,000 in the U.S.), and IBM is already a global entity. They are going to be hiring people in other countries regardless of whether people from the U.S. or Canada take the offer. IBM is offering laid-off workers an opportunity that other companies may not offer. According to the document, the company does provide financial assistance to program participants for moving costs. IBM also provides assistance with immigration, obtaining visas, and other transition challenges. I can't provide numbers, but I'm sure there are a significant number of young people willing to take the chance on working in another country simply for the experience alone.

I would love to hear what our members think of this plan, good or bad. Will it catch on? Will IBM be vilified or vindicated? Please post your comments!

7 Tips to Improve Knowledge Retention

Wed, 21 Jan 2009 17:16:10 GMT

(and why it's important in a downsliding economy)

When you're thinking about surviving in the current economy, you are probably not thinking about retaining the knowledge of key workers, but the two go hand-in-hand. No two people possess the exact same knowledge. If you have two VPs of Sales and you have to let one of them go, how do you capture the knowledge held by that person? If you have to halve your IT department, you don't want to also halve the knowledge held by that department. How will you capture the knowledge of the departing employees?

Lost knowledge can be expensive to recapture, and it can take years. Tacit knowledge in particular may never be retrieved once it is gone. A VP of sales may know the quirks or specific needs of certain clients; a chemist may know to expect a certain color or viscosity of a compound before it is at the peak of its effectiveness; an engineer just "feels" when a mechanism is assembled properly.

The Institute for Corporate Productivity (i4cp) found in a 2008 survey that while most companies believe knowledge retention is important, only a small percentage of companies have a strategy in place.

Companies use various strategies to help them retain knowledge when employees retire, separate, or are lost due to layoffs or downsizing. Strategies will differ depending on industry, size of organization and a number of other factors. Here are some strategies that have proven effective for various companies:

Social networking tools can cut through the chaos of information on the internet and improve the way workers share knowledge. One 2008 survey found that 40% of large companies (those with 10,000 or more employees) used social networking to tap the knowledge of their workers. Smaller companies may be slower to adopt this practice. Social networking can reach people beyond the score of a company newsletter or a mass email and it allows workers to share information in real time. And its scope reaches beyond the company, so workers can network with peers anywhere in the world.
Intranet. An intranet, such as a wiki or blogs, is used by workers within a company to share knowledge and information. This is especially effective in companies with facilities in diverse locations. Workers performing the same function thousands of miles apart are given the capacity to share valuable information and best practices.
Phased retirement strategies are becoming more prevalent as companies attempt to capture the talent of workers before they retire. There are many ways to structure a phased retirement program to meet the needs of the individual company and its employees. The employee may work part time, on a seasonal basis or on special projects that arise. The retiree may be called upon to train new hires or to be available to mentor younger workers. Some companies are even looking at ways to rehire their retired employees. Phased retirement is beneficial to the employer, who is able to retain critical talent, and at the same time help employees meet their retirement expenses, while perhaps easing the worker into a new phase of life. In the first quarter of 2008, American Express launched a pilot phased retirement program. Participants gradually give up their day-to-day responsibilities while they spend their time mentoring and teaching master classes to their successors, while receiving a reduced salary and full benefits. This program is being tested in the company's technology and finance units.
Learning communities can be virtual or face-to-face, and they allow workers who perform the same tasks to "meet" and share experiences and best practices, or questions about processes and procedures. This is also called a community of practice. Communities may "meet" on a regular basis, or they may get together spontaneously as the need arises. The group should have as leader or facilitator a more experienced employee. These communities are particularly useful when similar tasks are performed at diverse locations.
Develop an online data base. Employees will be able to access it to use for reference. They can add to the data base as an active participant in the company's knowledge retention efforts and interact with peers.
Knowledge maps consist of business process diagrams in which each step of a process is linked to specific knowledge and training. This strategy is being used by a municipal power company in California, as its workforce ages and there is great need to capture and share knowledge. This strategy captures role names, technologies, and learning reference materials.
Coaching and mentoring is now widely accepted by organizations worldwide. Coaching and mentoring are no longer seen as beneficial only for high performing future leaders, but as baby boomers inch toward retirement, they have been working one-on-one with younger workers to impart tacit knowledge. And 77% of respondents to a 2008 DBM study indicated a high return on investment as a result of coaching and mentoring, making this strategy even more attractive.

The digital natives are restless

Fri, 12 Dec 2008 17:37:12 GMT

Blogs, wikis, mashups, podcasts...what are we talking about again? Technology continues to come at us at a whirlwind pace, and it can be difficult to figure out what's important and what isn't. Right now it's Web 2.0 at the forefront, although the term has been around since being inspired by the dotcom bust in 2001. It has been referred to as the two-way Web, distinguishing it from when Internet users simply consumed information. Now the information is coming from all directions, and that scares a lot of digital immigrants (those of us who didn't grow up with this technology).

Most companies like to keep tight control on information, and that philosophy is the antithesis of what Web 2.0 is all about. But rather than fear the technology, companies must embrace it and harness its power. How many studies have we read and how many conferences have we gone to that were focused on knowledge-sharing? Well, Web 2.0 is knowledge-sharing. Blogs can be used to regularly inform others about what you are doing, what's going on and what's happening next. Wikis can store knowledge that can be updated continuously to always contain the newest ideas. Podcasts allow people to speak directly to an infinite audience - anytime, anywhere. Social networks allow employees who would never otherwise meet to learn about each other. In virtual worlds, those same employees can finally "meet" and interact, all while being shown concepts in ways that might be impossible to recreate in the real world. Another reservation that many companies have about this technology is that it is emerging from unknown, untested sources. If it all had a great big Microsoft logo on it, it might be more palatable.

The truth is, this is happening whether you like it or not. Young people entering the workforce have grown up interacting this way, and companies may have no choice but to employ these tools in order to attract, retain and develop this talent. That's not to say it's going to be a free-for-all. Guidelines and limitations need to be in place for any of these technologies to be effective workforce tools. Careless blogging can lead to legal trouble, wide open social networks can be a security risk and virtual worlds like Second Life have a habit of creeping into people's first lives.

The current economy may force some companies' hands as far as virtual worlds are concerned. It is far cheaper to get workers from around the world to meet on an island in Second Life than it would be to get everyone into the same building in Seattle. IBM has already held several all-company meetings on some of the islands it operates within Second Life. Web 2.0 technologies also don't demand the kind of up-front investment and deployment cycles that traditional software does. Mashups - combining two or more existing technologies to serve a new purpose - are by nature cost-effective solutions.

So whether you are unfamiliar with many of these concepts that are being talked about with more and more frequency, or you are an early adopter trying to convince your organization about the value of these technologies, there is little doubt that many Web 2.0 solutions will become common components of corporate intranets. The trick is to get rid of the idea that these are time-wasters that have no place in a company. Plus, if we don't get on board now, we are going to be in real trouble when Web 3.0 rolls around.

Don’t bury the survivors

Thu, 23 Oct 2008 18:06:00 GMT

News organizations and analysts have been tap dancing around it for months, but it looks like the word "recession" is starting to stick. And for those who are waiting for the fallout to be felt, guess what? It has already started. According to i4cp's Taking the Pulse: Reduction in Force survey (taken this month), 58% of companies have undergone a RIF in the past year, and 39% are expecting one in the next six months. And for those of you who have been through it already, here is some sobering news: Among companies that have had a RIF in the past year, half expect another one in the next six months. According to a May survey from Right Management, 54% of workers have changed jobs during their career as a result of downsizing or restructuring.

Chances are good that if you are reading this, you either have been or will be affected by downsizing in one of three gruesome roles: victim, survivor or executioner. These aren't my Halloween-inspired terms; they come from a recent paper on the effects of downsizing. Authored by Franco Gandolfi of Regent University and printed in the SAM Advanced Management Journal, the paper reviews numerous studies and concludes that downsizing is rarely successful in terms of its intended goals. In study after study, firms report no financial gains, failure to cut costs, underperforming stock prices and poor financial performance. How can this be?

One big reason is that firms get so wrapped up in the downsizing effort and focus on the victims that the survivors are often ignored. When asked what strategies they employed to help survivors, many respondents to i4cp's RIF survey indicated they had none. Here are some responses:

None
We don't
We're bad at it
None. Fear rules ... We went thru a RIF last summer
(My company) does very little; attempts to keep in touch but not very effective
We do not have any specific practice in place to engage surviving employees
They don't have a specific plan or strategy for keeping the rest of the crew involved or motivated

Keep in mind, these are people who were asked to volunteer any strategies they had. This doesn't include the other 73% who didn't provide a response. The "survivor syndrome" that ensues after a RIF can be a tremendous drag on an organization's performance. Workers who are retained because they are supposedly the best of the best end up distracted and disengaged, often resulting in a productivity nosedive. A study published in the Academy of Management found that, after a downsizing event, voluntary departures go up. And the worst part? It's the high-performing employees who are most likely to leave.

The evidence is clear that there needs to be a clear survivor strategy included in any downsizing effort. Whatever resources are dedicated to things like severance and/or outplacement services should be mirrored in efforts to manage remaining employees. Because, when the dust settles, it's the remaining employees who dictate whether the company is successful or not.

Centralized or decentralized? Why not both?

Tue, 14 Oct 2008 15:45:00 GMT

Despite the constant barrage of breaking news alerts about the tanking economy, most companies are not days away from bankruptcy and releasing hundreds of thousands of workers into the streets. Instead, they are carefully examining their options and planning strategies to cope. Believe it or not, one of those strategies is actually to expand operations. Both expanding into a new business or into a new geographic location can set a company up to weather future turmoil by diversifying. The question is, how do you organize a company with several different businesses, locations or both? Is a centralized organization better, or is a decentralized structure?

It turns out that the answer most often is both. Companies have found that there are certain functions that simply cannot be run effectively from a centralized location, prompting a push toward decentralization. At the same time, firms are also trying to find ways to keep their various business units and locations on the same page and coordinated. The trick is to find the blend that works best for your organization.

For globally diverse companies, marketing, manufacturing and operational functions are frequently decentralized. These processes are often better left to local leadership that understands the markets. It can become incredibly complex when a company has separate marketing, management and product lines in each country within a region. A study by professors from the Ross School of Management at the University of Michigan suggests that one hub in a "gateway country" could handle those functions with nothing more than customer-facing branches in each country in the surrounding region. Using this approach, the authors claim that a company could reach the entire globe with just 20 hubs.

The trick to having such a decentralized organization is keeping everyone facing the same direction. Many decisions, rules and regulations must come from the top down and affect the entire organization. The key is determining what decisions can be made at a local level and which need to be left to the central organization. William Weldon, CEO of Johnson & Johnson, knows this very well. His company has three distinct businesses in several parts of the world. Weldon emphasizes that decentralization doesn't work without strong leaders who can be trusted to run the separate businesses and locations. In an interview with Knowledge@Wharton, he admitted that there was a loss of control in their decentralized approach, but that the benefits in their case made it worthwhile. He cited the ability to innovate across business units and the opportunity to grow leaders in what are essentially small companies under the J&J umbrella.

Technology plays a big part in making the decentralization push work. Training, compliance and corporate goals can all be developed centrally and delivered via a learning management system to anywhere in the world, with appropriate modifications for each locality. The real question for companies is not which approach to take, but the level at which centralization gives way to decentralization. How much autonomy should each country have? How much autonomy should each business unit have? The answers are different for each organization, and no one approach is the answer. But what is clear is that, with globalization upon us, a company cannot expect to compete on that level while operating from a completely centralized bunker.